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Edinburgh pips London as UK’s most attractive city for inward investment, reveals Arcadis

Posted: 20th February 2018

Investment potential shifts away from South East as weaknesses around housing and infrastructure threaten UK’s most established centres

Increased investment in skills could push Northern Powerhouse and West Midlands further up the rankings

Importance of ‘place’ and ‘brand’ creates opportunities for smaller regional cities to play to existing strengths to encourage a UK-wide spread of investment

All cities have strengths: specific targeted actions will boost their long-term potential as investment destinations

Edinburgh has been revealed as the UK’s most attractive city for inward investment, according to research undertaken by Arcadis. Topping the charts for economic performance, as well as being recognised for having a strong quality of ‘place’ and high proportion of skilled and educated workers, Edinburgh has a huge amount to recommend it to potential investors. However, London’s position in 7th place, behind smaller regional cities including Liverpool (4th) and Coventry (5th), highlights the challenges associated with sustaining the growth of some of the UK’s most established economic centres, as the propositions of regional cities increasingly offer greater appeal to inward investors.

The results are according to the latest Arcadis report, “Investing in Britain: Cities Built for the Future”. The study ranks 24 of the UK’s key cities based on their performance across six key pillars deemed crucial for future inward investment and growth potential. These are: business environment, workforce and skills, infrastructure performance, housing, place and city brand.

The report identifies three distinct groupings of cities, representing different economic profiles and subsequently a city’s ability to sustain its attractiveness to future investment. These are: Established Economic Centres, Future Growth Hubs, and Smaller Regional Cities.

Although Edinburgh currently tops the rankings, as an Established Economic Centre it requires high levels of investment just to accommodate continuing growth. The biggest risk for Established Economic Centres is that they could fall back down the rankings if weaknesses around infrastructure and housing capacity – a direct result of population growth thanks to a city’s attractiveness – are not addressed. As is the case with London, the positive agglomeration effect of talent and resources may not be sustained unless fundamental issues that impact on quality of life are addressed.

Edinburgh needs to ensure that the speed of its economic growth doesn’t surpass its ability to invest in housing and infrastructure. Yet, while it benefits from having strong business fundamentals already in place, some additional improvements – including more affordable housing and an environment that fosters invention and the creation of patents – could mean that its strength as a magnet for investment rivals that of any other city worldwide.

Future Growth Hubs like the Northern Powerhouse and West Midlands do not face the same pressures on housing and infrastructure. They benefit from a more balanced housing market, healthy business environment with a sustainable pace of growth and often a better quality of life than cities like London. For large, successful cities like Manchester and Birmingham, a lack of skills could be the biggest barrier preventing them from realising their full future potential as an investment destination. Leaders of Scotland’s city regions need to address future competition from cities like these, which have created a dynamic environment for investment focused on core strengths in advanced manufacturing and product innovation.

Smaller regional cities need to consider different levers for attracting investment, building on their specific strengths and opportunities – including better access to schools and hospitals, cheaper housing and a better quality of life. For many cities, raising profile and brand presents a further opportunity to build on existing strengths to increase investment potential. Recognition can come from regeneration, innovation, sporting success or even the idea that a city is a great place to live. Short term measures to increase momentum in this respect, including visitor attractions, nightlife and even social media presence, can help city leaders make an immediate impact and attract further employment and inward migration.

Graham Hill, Arcadis Cities Executive for Scotland, said:

“Truly investable cities are not only those with the most mature economies but, like Edinburgh, have to demonstrate they can also offer a healthy and attractive place for people to live. Edinburgh is performing well, but could be world-leading if some fundamental issues are addressed. The fact is, we can’t afford to be complacent. Some of the UK’s most successful cities are at risk of becoming victims of their own success, and it is imperative that Edinburgh’s future growth isn’t constrained by a lack of affordable housing or transport not keeping pace with changing demographics and new technology. The commitment to 20,000 new affordable homes must embrace placemaking principles in order to create sustainable places where people want to live.

“Ultimately, every city region in Scotland needs to look at what it has to offer, and how it can make the most of it. The governance of a city needs to be structured in a way that makes investment easier and more welcome. This will ensure that investment opportunities are focused on the right locations, helping to accelerate growth potential and ultimately realise new sources of competitive advantage.”

The top 15 most investable cities in the UK, and three of the key levers they will need to pull to increase their attractiveness to investment, are:

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.